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Macro-micro feedback links of water management in South Africa : CGE analyses of selected policy regimes

Author

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  • Hassan, R.
  • Thurlow, J.
  • Roe, T.
  • Diao, X.
  • Chumi., S.
  • Tsur, Y.

Abstract

The pressure on an already stressed water situation in South Africa is predicted to increase significantly under climate change, plans for large industrial expansion, observed rapid urbanization, and government programs to provide access to water to millions of previously excluded people. The present study employed a general equilibrium approach to examine the economy-wide impacts of selected macro and water related policy reforms on water use and allocation, rural livelihoods, and the economy at large. The analyses reveal that implicit crop-level water quotas reduce the amount of irrigated land allocated to higher-value horticultural crops and create higher shadow rents for production of lower-value, water-intensive field crops, such as sugarcane and fodder. Accordingly, liberalizing local water allocation in irrigation agriculture is found to work in favor of higher-value crops, and expand agricultural production and exports and farm employment. Allowing for water trade between irrigation and non-agricultural uses fueled by higher competition for water from industrial expansion and urbanization leads to greater water shadow prices for irrigation water with reduced income and employment benefits to rural households and higher gains for non-agricultural households. The analyses show difficult tradeoffs between general economic gains and higher water prices, making irrigation subsidies difficult to justify.

Suggested Citation

  • Hassan, R. & Thurlow, J. & Roe, T. & Diao, X. & Chumi., S. & Tsur, Y., 2008. "Macro-micro feedback links of water management in South Africa : CGE analyses of selected policy regimes," Policy Research Working Paper Series 4768, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4768
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    References listed on IDEAS

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    Cited by:

    1. Roberto Ponce & Francesco Bosello & Carlo Giupponi, 2012. "Integrating Water Resources into Computable General Equilibrium Models - A Survey," Working Papers 2012.57, Fondazione Eni Enrico Mattei.
    2. Zvi Baum & Ruslana Rachel Palatnik & Iddo Kan & Mickey Rapaport-Rom, 2016. "Economic Impacts of Water Scarcity Under Diverse Water Salinities," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 1-22, March.
    3. Njiraini, Georgina W. & Thiam, Djiby Racine & Muchapondwa, Edwin, 2016. "Implications of water policy reforms on water use efficiency and quality in South Africa: The Olifants river basin," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246440, African Association of Agricultural Economists (AAAE).
    4. Gill, Tania & Punt, Cecilia, 2010. "The Potential Impact of Increased Irrigation Water Tariffs in South Africa," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96425, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    5. Dinar, Ariel, 2012. "Economy-wide implications of direct and indirect policy interventions in the water sector: lessons from recent work and future research needs," Policy Research Working Paper Series 6068, The World Bank.
    6. Zhao, Jing & Ni, Hongzhen & Peng, Xiujian & Li, Jifeng & Chen, Genfa & Liu, Jinhua, 2016. "Impact of water price reform on water conservation and economic growth in China," Economic Analysis and Policy, Elsevier, vol. 51(C), pages 90-103.
    7. Chokri Thabet, 2014. "Water Policy and Poverty Reduction in Rural Area: A Comparative Economy Wide Analysis for Morocco and Tunisia," Working Papers 860, Economic Research Forum, revised Nov 2014.
    8. repec:eee:ecolec:v:149:y:2018:i:c:p:12-20 is not listed on IDEAS
    9. Scheierling, Susanne M., 2011. "Assessing the direct economic effects of reallocating irrigation water to alternative uses : concepts and an application," Policy Research Working Paper Series 5797, The World Bank.
    10. Jing Liu & Thomas Hertel & Farzad Taheripour, 2016. "Analyzing Future Water Scarcity in Computable General Equilibrium Models," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 1-30, December.

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    Keywords

    Water Supply and Sanitation Governance and Institutions; Town Water Supply and Sanitation; Water Supply and Systems; Water and Industry; Water Conservation;

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